June / July 2016 : Changing Beneficiary Designations

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA

Excerpt:

Two recent Court of Appeals decisions on disposition of (1) 401(k) account and (2) life insurance proceeds in disputes between decedents’ estates and former spouses who were the named beneficiaries. Patrick Estate v. Freedman, Mich App No. 324438 (2/11/16); Lett Estate v. Henson, Mich App No. 326657 (3/17/16).

Facts – Patrick Estate v Freedman (Unpublished)

• During their marriage, H designated W beneficiary of his 401(k) plan account.
• In their 2007 consent judgment of divorce (JOD), it was provided that W be designated beneficiary for the amount assigned to her if H died before her share was segregated into an account for her.
• e JOD also provided – “Except as otherwise provided herein, any rights of either party as beneficiary in any pol- icy or contract of life, endowment or annuity insurance of the other, as beneficiary, are hereby extinguished.”
• And further – “Except as otherwise stated herein, each party shall retain exclusively any retirement benefits to which they are or shall become entitled to due to their employment, and any claim thereto by the other as beneficiary or otherwise is extinguished.”
• H died in 2014 without having changed the beneficiary designation.
• At W’s request, the plan administrator distributed the proceeds of H’s 401(k) account to her.
• H’s estate led a complaint claiming that she was not en- titled to the 401(k) account.
• e trial court ruled that while it was proper for the plan to distribute the 401(k) account proceeds to W, the beneficiary on record, but, under the terms of the JOD, she did not have the right to retain them.
• W appealed.

Court of Appeals Decision…

Complete Michigan Family Law Journal available at: Michigan Bar website – Family Law Section (subscription required)